Unit 2.1 The NFIR Directive

1. Unit 2.1 The NFIR Directive Background andProvisions Unit 2.1 The NFIR Directive

2. Structure • Background on Directive 2014/95/EU • Scope • Content • Topic specificinformation • Materiality • Safe harbour • Complyofexplain • Frameworks • Disclosure • Audits • Non-compliance Unit 2.1 The NFIR Directive

3. Background on Directive 2014/95/EU • adopted on 22 Oct. 2014, amending Directive 2013/34/EU regarding the disclosure of non-financial and diversity information by certain large undertakings and groups • requires large companiestodisclosecertaininformation on thewaytheyoperateand manage socialand environmental challenges • aims at improving transparency of social and environmental information • in order to identify sustainability risks and increase investor and consumer trust • helps investors, consumers, policymakersandotherstakeholderstoevaluatethe non-financialperformanceof large companiesandengouragesthesecompaniestodevelop a responsibleapproachtobusiness • Companies arerequiredtoprovide non-financialstatementstartingwiththefiscalyear2017 Unit 2.1 The NFIR Directive

4. Scope • Obligation to disclose a non-financial statement only applies to those large undertakings which are public-interest entities and to those public-interest entities which are parent undertakings of a large group • Large undertakings: • Average number of employees in excess of 500 plus • Balance sheet total exceeding EUR 20 millionor • Net turnover exceeding EUR 40 million • Public-interest entities: • Credit institutions • Insurance undertakings • Undertakings whose transferable securities are traded on the regulated market in at least one of the member states • Additional definitions can be applied by member states Unit 2.1 The NFIR Directive

5. Content • Topic specificinformation: Where undertakings are required to prepare a non-financial statement, that statement should contain information regarding: • Environmental matters in terms of current and foreseeable impacts of the undertaking's operations, including: • Health and safety • Use of renewable and/or non-renewable energy • Greenhouse gas emissions • Water use • Air pollution Unit 2.1 The NFIR Directive

6. Content b) Social and employee-related matters, including: • Gender equality • Implementation of fundamental conventions of the International Labour Organisations • Working conditions • Social dialogue • Right of workers to be informed and consulted • Trade union rights • Health and safety at work • Dialogue with local communities, and/or actions taken to ensure the protection and the development of those communities Unit 2.1 The NFIR Directive

7. Content c) Human rights d) Anti-corruptionandbribary Information for each of the above-mentioned fields must contain: • Business models • Policies pursued • Outcomes of the policies • Risk related to those matters • Non-financial key performance indicator relevant to the business Unit 2.1 The NFIR Directive

8. Content • Materiality The undertakings should provide adequate information in relation to matters that, in their assessment, might be the most likely triggers of principle risks with potentially severe impacts, along with those risks that have already materialised Unit 2.1 The NFIR Directive

9. Content • Safe harbour Information relating to impending developments or matters still subject to negotiation may be omitted in exceptional cases where the disclosure of such information would seriously compromise the commercial position of the undertaking. It has to be ensured that such an omission does not prevent a fair and balanced understanding of the development, performance and position of the undertaking, as well as the impact of its activity Unit 2.1 The NFIR Directive

10. Content • Complyorexplain If policies are not yet applied, there should not be any obligation to put one in place. However, the consolidated non-financial statement has to include a clear explanation as to why this is the case Unit 2.1 The NFIR Directive

11. Frameworks • Non-financial statements may rely on national frameworks as well as those recognised in the EU or internationally, e.g: • Global Reporting Initiative (GRI) • Eco-Management and Audit Scheme (EMAS) • United Nations (UN) Global Compact Guiding Principle, • OECD Guidelines for Multinational Enterprises • ISO 26000 • ILO Tripartite Declaration Unit 2.1 The NFIR Directive

12. Disclosure • The non-financial statement may be disclosed either: • as part of the management report or • a separate report • In case a separate report is published, this has to be done alongside the management report or within 6 months of the balance sheet date Unit 2.1 The NFIR Directive

13. Audits • Statutory auditors and audit firms should only check that the non-financial statement or the separate report has been provided • In addition, it is possible for Member States to require that the information included in the non-financial statement or in the separate report be verified by an independent assurance services provider Unit 2.1 The NFIR Directive

14. Non-compliance • Sanctions or fines in case of non-compliance are not provided by the Directive Unit 2.1 The NFIR Directive

15. The European Commission support for the production of this publication does not constitute an endorsement of the contents, which reflects the views only of the authors, and the Commission cannot be held responsible for any use, which may be made of the information contained therein. Module 2.1 The NFIR Directive